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How to Control Your Workers’ Comp Premiums


Workers’ Compensation Insurance premiums are based on what’s known as the “experience mod rate.” This is an actuarial number assigned to your company based on your past experience with workers’ comp claims.

Here’s how the experience mod works. Say the “base rate” for coverage is $100 per month. If your experience mod is 0.75, then your premium will be $75. But if your experience mod is 1.25, you’ll pay $125 for the same coverage.

Minimize Your Claims
The key to low premiums is to have a low experience mod rate, which requires minimizing your claims. This is especially important because your experience mod is based on a multi-year calculation – so you’ll feel the pain of each claim for more than one year.

Put a Solid Risk Management Plan in Place
To reduce injuries and workers’ comp claims, implement a Risk Management Plan that requires you to:

• Watch for trends – Review three years’ worth of claims to identify any patterns that emerge. For example, are you seeing a lot of lower back injuries? If so, why? And what can you do to address this problem?
• Have a written Safety Plan – This plan must be in compliance with Cal OSHA requirements, which vary by industry. Your workers’ comp broker may be able to provide a template for this.
• Conduct regular safety training – Get buy-in by asking employees what the company can do to make the workplace safer for them, and then take action on these recommendations.
• Perform regular safety inspections – While most office environments can get by with an annual inspection, others (such as construction and manufacturing firms) should inspect their workplace at least once each day.

Be Proactive
No one is going to care more about controlling your costs than you will.

• Get multiple bids – Be sure to get two or three quotes, preferably from solid companies that will help you with risk management.
• Manage open claims – Work with the Claims Manager at your insurance provider to get claims closed as quickly as possible. If a claim is open at year end the insurer will establish a reserve for it. This reserve, which may be several times greater than what has actually been spent on treatment, goes into the calculation of your experience mod…even if it ultimately turns out to be more than actual costs.

Finally, pay attention to your insurance classification codes – a topic which I’ll examine in depth in my next article. Stay tuned!

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